The sell-off by the foreign institutional investors (FIIs), first in the wake of the sub-prime crisis and then the credit derivatives losses, has thrown open a sea of opportunities for the domestic institutional investors (DIIs). From December 2007 to March 2008, FIIs have decreased their stake in Indian companies and DIIs have hiked their exposure to key sectors in the Indian equities market.
FIIs have sold their holdings in sectors such as oil & gas, capital goods and FMCG in the last one quarter, while the mutual funds and insurance firms have started parking their funds in the same sectors. According to the data compiled by Deutsche Bank, while FIIs decreased their stake in oil and gas sector from 11.4% at the end of the December-quarter, to 10.9% for the quarter ended March 31, 2008, MFs and insurance firms have increased their stake during the period, from 1.9% to 2.4% and 4.3% to 4.7%, respectively. In the capital-goods sector, MFs have increased their stake by 0.4%, while FIIs have reduced their stake by 0.9%.
Arun Kejriwal, CEO of KRIS, said, ?Even at this level of the Sensex at 14,500-15,000 points, the existing portfolio of the FIIs would still fetch them good returns and they can still offset their loses incurred in some other markets by selling in the Indian markets. However, if the Sensex tanks further by 1,000-odd points, we will be at the last year?s level, (when the FIIs started flocking in the Indian markets), and they would start making losses. The chances that the FIIs have dumped stocks with lesser returns may not be ruled out and Indian institutional investors are taking their chances in such stocks.?
The Deutsche Bank data also hinted that domestic insurance firms have hiked their stake in Sensex stocks from 5.5% to 5.9% during the same period.